US Investors led US$12 Billion flow into Asia-Pacific real estate in Q2 2025

According to Knight Frank’s Asia-Pacific Capital Markets Insights Q2 2025, real estate investment in the region reached US$42 billion in the second quarter, up 10.1 percent year-on-year and 7.4 percent quarter-on-quarter, as investors adjusted their strategies amid evolving market conditions.

Cross-border investment activity reached US$12.1 billion, marking the highest level since the third quarter of 2022, excluding a spike in Q4 2024. This 50.1 percent year-on-year increase reflects growing international confidence in the region's fundamentals, even as tariff uncertainties and economic crosscurrents create a more cautious investment environment. US investors led the charge into safe-haven countries such as Australia, Japan, and Singapore.

Craig Shute, CEO, Asia-Pacific, Knight Frank says, “The uplift in investment volumes this quarter demonstrates the region's continued appeal to global capital. Despite ongoing uncertainties, investor interest remains high, with cross-border flows increasing and sectors such as living and data centres continuing to outperform. There are clear signs that long-term fundamentals remain attractive. While some sectors face short-term challenges, the market continues to adapt as investors seek both stability and growth opportunities.”

Living sector investment nearly doubles in portfolio deals

Traditional assets continued to dominate activity, but investors sharpened their attention on alternatives, especially living-sector assets and data centers.

Investment in the living sector nearly doubled year-on-year, reaching US$4.9 billion as institutional players made major portfolio moves. The quarter's two largest deals both involved Australian assets: Brookfield Asset Management sold 65 senior living facilities to The Living Company for US$2.5 billion, and Greystar acquired a student housing portfolio from GIC and Wee Hur for US$1.0 billion.

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Data centre investment reached US$2.4 billion, up 40.2 percent from the previous quarter. Iron Mountain acquired a 62 percent stake in Web Werks to gain full control of six Indian data centres, while GLP launched a US$362 million fund targeting data centre assets in the Chinese mainland Greater Beijing area.

Christine Li, head of research, Asia-Pacific, Knight Frank, says, “Investor interest in Asia-Pacific real estate remains firm, but there is a greater sense of discernment around asset type and quality. We see clear signs that international capital is gravitating towards locations and sectors offering income stability and reliable growth prospects, even as trade tensions and the prospect of shifting monetary policy add an extra layer of complexity. Looking ahead, sustained economic and geopolitical uncertainty will likely shape investor decisions, but improving prospects for US trade agreements and more accommodative financing could provide added impetus for activity in the second half of the year.”

Australia captures almost a third of foreign investment, while Singapore and Japan post strong growth

Australia led cross-border activity, capturing almost a third of the total volume (US$3.8 billion), held by strong interest in the living sector and prime office assets. Other than the living sector, prime and centrally located office assets continue to attract the interests of overseas investors, especially the Japanese, as yields have stabilized. Daibiru acquired 135 King Street in Sydney for US$375 million at 6 percent cap rate, while Odakyu Electric Railway bought a 10 percent stake in Salesforce Tower, Sydney's tallest office building.

Japan's real estate market maintained its appeal to international capital, with foreign investors acquiring approximately US$2.4 billion in assets. Despite transaction volumes declining by 14.8 percent year-on-year, sustained international interest reflects the market's strong fundamentals, even in the face of uncertainty. Investment activity was largely concentrated in the living and industrial sectors. Key transactions included Warburg Pincus acquisition of Lone Star's Beta portfolio, comprising 1,195 multifamily units, and Aberdeen’s purchase of two premium residential rental assets in Tokyo.

Singapore saw an increase in foreign capital inflows, with overseas investors committing US$2.3 billion, a sharp rise from just US$342 million in the same quarter last year. Major transactions driving this growth included IOI Group's acquisition of a 50.1 percent stake in the mixed-use South Beach development for US$650 million, effectively gaining full ownership, and Brookfield Asset Management's US$420 million purchase of three industrial properties from Mapletree Industrial Trust.

Regional investment faces headwinds, but easing rates signal opportunity

Looking ahead, the combination of declining borrowing costs and a potentially weakening US dollar could stimulate additional investment across the region, though prolonged geopolitical instability remains a key risk factor for market participants.

In other key sectors, investors displayed greater selectivity, seeking assets with strong fundamentals, stable returns, and resilience to market volatility. While rising office rents in Tokyo and Sydney promise some support for valuations, and the possibility of further rate cuts could enhance Sydney’s appeal, investors remain cautious amid ongoing policy uncertainty and shifts in the cost of capital.